On Your Own

Retiring Begins by Answering the Right Questions

OnYourOwn Man-1348082_1920It goes without saying that retirement is a significant life change. Equally obvious is the fact that many Boomers deny the reality of retirement, working as long as they are able. But at some point, most of us realize that maintaining the same pace is an impossibility and, at the very least, we accept the need to transition to something different. That something may not look like traditional retirement at all, but chances are it doesn't look like our previous career-focused lifestyle either.

There are so many questions surrounding retirement -- the next phase, reinvention, second act, or however you define it -- that it can be bewildering just to know the right questions to ask. Writing for The Balance, senior financial planner Scott Spann seems to have identified five of the most important questions to answer:

  1. What do you look forward to doing the most in retirement?
  2. How long do you need your money to last?
  3. How much retirement savings will you actually need?
  4. How much should you be saving today?
  5. How much can you afford to spend yearly once retired?

As you can see, the first question is really qualitative while the next four are quantitative. Spann offers some wise commentary about how to answer each of these questions, so the article is worth reading here: https://www.thebalance.com/five-important-retirement-questions-you-need-to-answer-4025465?

None of the questions are necessarily easy to answer; in fact, all of them probably require a great deal of thought, some serious self-reflection, conversations with your significant other, and counsel with a financial adviser. But contemplating retirement without adequately answering these questions is fraught with risk. If you've had a successful life, you know by now that planning ahead is an essential part of building a secure future. It should be no different with retirement: First ask the right questions -- and then be sure you answer them to the best of your ability.

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There are Creative Living Alternatives for Boomers

OnYourOwn Pensioners-3347948_1920As Boomers age, they may find themselves facing the necessity to change where they live. A good percentage of Boomers claim they want to "age in place," but that isn't always the best or most practical choice. Still, as I've written about in the past, Boomers interested in staying in their current home may be able to do so if they make intelligent modifications to remain safe and secure.

Some Boomers realize, though, that aging in place can be stressful. This is particularly true of individuals who, by circumstance or choice, are living by themselves. At the very least, these folks may need to consider downsizing, if not relocating into a more age-friendly residence. Apartments or condominiums rather than private homes may be attractive options.

Not surprisingly, more and more creative living alternatives are becoming available for Boomers. For some time now, Boomers have been able to take advantage of adult communities. More of them seem to open every day. Whether they're labeled "active adult" (55-plus) or retirement communities, these communities often provide a range of amenities and activities, sometimes including meal service, housekeeping and transportation. Some communities feature rentals while others require property purchase. At the high end, "continuing care" retirement communities may provide a full continuum of care when it is needed, from independent living through assisted living through on-site nursing facilities.

Two of the more novel living alternatives fall somewhere between living independently and being part of a social network:

Cooperative housing

This concept involves a property in which residents share certain responsibilities. A good example is Phoenix Commons in Oakland, California. Here's how Phoenix Commons describes their environment:

"Cohousing is an intentional community of private homes clustered around shared space. Each single family home has traditional amenities, including a private kitchen, while shared spaces may include a large kitchen and dining area, laundry and recreational spaces.

"Cohousing communities are built around separate homes in proximity, with a common house, or in a single structure with a lot of shared common space to complement individual condominium units. Householders in cohousing have independent lives but neighbors collaboratively plan and manage community activities and shared spaces, typically under the structure of a Homeowners’ Association.

"Cohousing groups seek to balance private and community needs while building mutually supportive relationships among their members. Social events, impromptu gatherings, shared meals and scheduled meetings provide ample opportunity for interactions. At Phoenix Commons important community decisions are made using participatory processes that help bring the group toward consensus."

Homesharing

Another creative lifestyle alternative is homesharing, which you might consider cohousing on a much smaller scale. A good example is Silvernest, a homesharing platform. Here's how Silvernest describes homesharing and their service:

"Homesharing is exactly what it sounds like: sharing a home. Silvernest enables homeowners to rent out a room or portion of their home to a qualified housemate (in other words, a renter) of their choosing. The many benefits of homesharing include extra income, companionship, the ability to stay in your home longer, the security of cohabiting, and even help around the house. Silvernest homeowners can offer reduced rent in exchange for home maintenance, cleaning and other around-the house help from their renter.

"Silvernest is a one-stop-shop online homesharing platform that pairs boomers, retirees, empty nesters and other older adults with compatible housemates for long-term rent arrangements. Through these creative living situations, homeowners earn extra income (about $10,000 a year), remain in their homes longer, and keep isolation at bay, while renters pay far less than market rent. Both enjoy companionship and the efficiencies that come with sharing a space."

Cooperative housing and homesharing may not be for everyone, but they are emerging creative ideas addressing the reality that Boomers may need living alternatives other than the traditional ones.

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The Big Three Retirement Changes

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OnYourOwnMake sure you read the articles in a special retirement section that appeared in The New York Times on September 12, 2019. In one of those articles, Kerry Hannon writes about three significant changes that take place in retirement, as explained by Ken Dychtwald, retirement expert and founder of AgeWave. These are indeed "The Big Three"...

  1. Identity
  2. Relationships
  3. Activity

I'd like to address each individually, both from Dychtwald's perspective and filtering in my own experience.

Identity

According to Dychtwald, "Our identity has been forged and tweaked and shaped by our work life.” Particularly with professionals, their identities are intertwined with their careers. Imagine an engineer, a software developer, a professor, an attorney, or a physician whose lifelong work has consumed much of his or her time. Imagine a senior manager or CEO who has devoted decades to leading an organization. The shift away from this full-time role, whether it's voluntary or not, is a personal loss of professional identity that should not be underestimated.

My identity was defined by the fact that I was a marketing professional, in large part because I started and ran a direct marketing agency for twenty years. I made the "identity transition" prior to my early retirement by selling that firm to a larger agency and accepting a new role for a short period of time. That helped modify my self-perception. I then started a small business with my wife. When we sold that business, I became a marketing consultant and then a freelance writer. My perception of my identity remains, however: I still at least partially define myself by what I do professionally as a writer -- although now I view it as more of an avocation.

Relationships

At the top of the change list, says Dychtwald, is relationships. In retirement, people miss the relationships they forged as part of their careers. While some work friendships transcend the workplace, retirees may end the relationships they had with coworkers, resulting in a real sense of loss. Other relationships could fray as well, especially if retirement includes a relocation. Moving away from long-time friends can be disconcerting. In addition, it isn't uncommon for marital relationships to suffer or be redefined due to retirement.

I was fortunate in that I could continue some work relationships through freelance writing after leaving full-time employment. I also built new work relationships via volunteering as a consultant and at a non-profit organization. By starting a business together, my wife and I were able to enter a "pre-retirement" phase and share a common business interest. This helped strengthen our relationship (although not every couple is able to successfully work together). 

Activity

Dychtwald observes, “Most of us, until our retirement day, have lived our lives in a structured lifestyle. You retire, and all of that is dissolved." How true this is! One of the more challenging aspects of retirement, even if it is a partial retirement, is the fundamental change of schedule. The busy workday calendar -- with its meetings, deadlines and obligations -- is gone. Remarkably, there is now time to do the laundry and the shopping, which requires a whole different kind of scheduling. For some, this is a breath of fresh air; for others, it can become an affliction if they face the frightening thought, "What am I going to do today?"

I believe the best way to cope with this is to keep busy, creating a post-work retirement that has its own structure and is designed around each person's unique requirements. For some, that may be a mix of part-time work, volunteering, and recreation. For others, it may mean taking courses, playing tennis, or traveling. Personally, I think it is less important what each person is doing than it is to feel that you are getting satisfaction from your activities and are vital and engaged in life.

HappilyRewired.com is a Top 75 Baby Boomer Blog.

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Why a "Second Act" can be a Second Chance

OnYourOwn Stopwatch-2062098_1920Whatever their careers, most Boomers have spent a major portion of their lives working to provide for their families. If they've been successful at earning a good living and wisely managing their money, Boomers have a stellar opportunity -- a second chance if you will -- to play in a "second act." Generally, a second act refers to reinventing or rewiring retirement and doing something you are passionate about -- hopefully unconstrained by the need to earn a high income.

Everyone's definition of a second act is different. For some, it may involve a new, more flexible relationship with an existing employer to phase out of a full-time job into part-time work. For others, it could be transitioning into an entirely new career that generates more modest income. Still others define a second act as a combination of  working part-time, volunteering part-time and playing part-time.

How you define your second act is very much up to you -- but a big challenge many Boomers face is how to get there. Mary Kane, Associate Editor of Kiplinger's Retirement Report, writes about the process in her excellent article, "6 Steps to Finding Your Second Act in Retirement." She advises, "You’ll need to do both soul-searching and research first to understand which of your skills are transferable and how they can be useful. You’ll want to prepare well in advance to shore up your finances, paying off any debts and becoming accustomed to a different standard of living—perhaps living with less income on a trial run for a few months. You may need to mix volunteering with paid work, or find part-time work that will provide health coverage, to ease your transition and the stress on your wallet. And you’ll need to create a new professional network in your community, well beyond the circle of former colleagues and contacts you spent decades establishing in your previous career."

There's no question this transition can sound a bit intimidating, so Kane identifies six key steps on the path to a second act:

  1. Begin Early
  2. Fix Your Finances
  3. Build a Bridge
  4. Do a Midternship
  5. Tackle the Internal Work
  6. Take It Slow

Kane describes each of these steps in her article and includes examples and input from retirement experts. It is offers very helpful guidance for starting a successful second act.

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Read about the brands you loved as a kid in the book, BOOMER BRANDS


Is It Smart to Age in Place?

OnYourOwn House-3686128_1920As Boomers age, they may consider relocating from their current home, especially if it is too large. The increasing popularity of active adult and retirement communities is a clear indication that Boomers are more than willing to relocate to improve their living situation.

But for those who do not want to leave their homes, the concept of "aging in place" is gaining traction. According to The Center for Aging in Place, "Aging in Place is a national movement to enable people to stay in their own homes as they grow older by making available the social support, health care, and home maintenance services they require to live happy, productive lives in the community."

Aging in place can have both a positive and negative side. On the positive side, wise Boomers are making a concerted effort to modify their existing homes so they are safer, more secure habitats. On the negative side, some Boomers adamantly refuse to make needed modifications if they do not want leave their homes, creating a situation that could easily result in tripping, falling, or severe personal injury.

If you've made a decision to age in place, you owe it to yourself to take a good, hard look at your physical home, your neighborhood, and your general environment. You should ask yourself honest questions about whether or not there are deficiencies or conditions that need to be remedied for you to be able to live comfortably as you age. This article on NextAvenue.org answers several important questions: https://www.nextavenue.org/answers-questions-aging-place/

AARP has a wealth of material about aging in place offered through the "AARP HomeFit Guide." You can find it here: https://www.aarp.org/livable-communities/info-2014/aarp-home-fit-guide-aging-in-place.html 

Porch.com offers a comprehensive guide to aging in place: https://porch.com/advice/aging-in-place-what-every-senior-should-know

Below are a few links to some valuable resources concerning aging in place, courtesy of Marie at ElderImpact.org:

The Most Common In-Home Injuries for Seniors and How to Prevent Them

How to Reduce Hoarding and Clutter to Prevent Falls

How to Remodel for Accessibility

How to Make & Pay for Home Modifications to Enable Aging in Place

Top 7 Garage Safety Hazards that You Shouldn’t Be Ignoring

Making Aging in Place Easier with Digital Health Technology

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Yes, You can Start a Business This Year

OnYourOwnThere's a boom in small business, and a significant percentage of it is being driven by Boomers. As much as one-quarter of all new businesses are started by Boomers age 55 to 64, according to the 2017 Kauffman Index of Startup Activity. Older entrepreneurs, even beyond the age of 64, are becoming increasingly common.

The rise in Boomer businesses is not all that unusual. Highly skilled Boomers who are let go from the workplace find that they can leverage their expertise and skills into starting their own business. Boomers who may be tired of working for someone else may see a real opportunity in being self-employed. Still, Boomers should be aware of a sobering statistic reported by the Bureau of Labor Statistics: Half of all small businesses fail by their fifth year.

That doesn't prevent plenty of Boomers from starting a business, but as with anything else, a key to success is going into it with your eyes wide open. Here's some great advice from a Forbes article by Robin Ryan.  She spoke with three experts on business startups and garnered these main points:

Focus on a target audience: Your chances of success are greater if you target a niche and know exactly who your prospects are.

Define your perfect client: "You need to be clear and know the exact type of person you seek to work with, and who will benefit most from working with you."

Go where the prospects are: Once you know who you are targeting, look for them in the right places: the organizations they belong to, the meetings they attend, the publications they read, the websites they visit, etc.

My wife and I left the traditional workforce in our late 50s to strike out on our own. We started a small service business and ran it together for seven years. After selling that business, I became an independent marketing consultant/freelance writer. Both of these reinventions have worked well for me.

Starting a business isn't for every Boomer, but it definitely presents a viable option for many of us.


Should You Freelance in 2019?

OnYourOwnMore and more Boomers face the work-life dilemma as they age. While there is no single perfect solution for everyone, an attractive option may be freelancing. This type of contract or hourly work used to be reserved for writers, designers, photographers and other creative types, but today, freelancing has a much broader definition. That's because the "gig economy" is thriving, so it is possible to freelance in just about any field. A recent study indicates that as much as 35 percent of the American population freelances, and more than half of them (51 percent) prefer freelancing to a traditional job, stating that "no amount of money" would make them switch. Another study puts the typical freelancer's hourly wage at $31 per hour -- but that can go much higher depending upon the market.

There was a time when Boomers only freelanced as "consultants" between jobs -- it was more of a pit stop along the way to "real" employment. Now, however, many Boomers are finding that freelance work can be personally and financially rewarding. It can provide you with a flexible work situation and decent income to supplement retirement savings.

Here are two helpful articles from The Balance that offer valuable information about freelancing:

"The Average Freelancer Salary in the U.S." - In this article, you'll find typical hourly and annual income figures for freelance positions in IT/Programming, Design and Multimedia, Writing and Translation, Sales and Marketing, Engineering and Manufacturing, Legal Services, and Administrative and Customer Support. 

"Best Second Job Ideas" - While this article primarily addresses freelancing as a second job, it offers an excellent overview of the freelance and second job market. It also offers a comprehensive list of "best second jobs" in alphabetical order from A to Z. This list is a great idea starter if you are uncertain what type of freelance position you might want to seek.

In addition to the above articles, do a search on freelance jobs and you'll discover a wealth of resources available to you. Maybe freelancing is the work-life solution you are looking for.


The Dirty Little (Encouraging) Secret About Entrepreneurs

OnYourOwnIt is often assumed that the most successful entrepreneurs in American society are young go-getters willing to take the ultimate risk and start a new business. Well you can substitute the word "youthful" for "young," because it turns out that middle-aged entrepreneurs are more successful than those who are young. Startling to some (perhaps including Boomers), this was demonstrated in a research study conducted this year. "Age and High-Growth Entrepreneurship," a paper written by Pierre Azoulay (MIT), Benjamin F. Jones (Northwestern University), J. Daniel Kim (MIT), and Javier Miranda (U.S. Census Bureau) arrives at the following conclusion:

"Our primary finding is that successful entrepreneurs are middle-aged, not young. The mean founder age for the 1 in 1,000 fastest growing new ventures is 45.0. The findings are broadly similar when considering high-technology sectors, entrepreneurial hubs, and successful firm exits. Prior experience in the specific industry predicts much greater rates of entrepreneurial success. These findings strongly reject common hypotheses that emphasize youth as a key trait of successful entrepreneurs."

This conclusion is based on Census Bureau data used to study the ages of founders of growth-oriented start-ups in the past decade.

The authors of the paper write that "all evidence points to founders being especially successful when starting businesses in middle age or beyond, while young founders appear disadvantaged." They go on to say, quite specifically, that "Conditional on starting a firm, a 50-year-old founder is 1.8 times more likely to achieve uppertail growth than a 30-year-old founder. Founders in their early 20s have the lowest likelihood of successful exit or creating a 1 in 1,000 top growth firm."

There can be no doubt about what the research discovered: "We find that age indeed predicts success, and sharply, but in the opposite way that many observers and investors propose. The highest success rates in entrepreneurship come from founders in middle age and beyond."

When you think about it, of course, this makes perfect sense. Why wouldn't someone with greater maturity and deeper business experience be more successful as an entrepreneur?

Still, the research paper, which you can access via the link above, might be useful to you in convincing friends, family, and financial lenders that you can succeed at doing your own thing! This research should be very encouraging to any Boomer who wants to start a business. Not only is it possible for you to do so, the evidence points to the fact that you are likely to be more successful than younger entrepreneurs, despite the typical perception. 


Tax Benefits for Self-Employed Boomers

OnYourOwnWhile there has been controversy surrounding recent tax legislation, it created what could be a boon for self-employed Boomers. The self-employed, contract workers, and freelancers stand to gain in a number of ways because of the way business deductions have been modified.

Writing for AARP, retirement expert Kerry Hannon does a good job of outlining the key tax benefits that may be available to you if you are self-employed, do contract work, or freelance. As with any such advice, though, everyone's situation is different and it always makes sense to consult a tax professional.

Hannon highlights a number of key areas and discusses them, including:

  • The qualified business income deduction: You could be eligible for a tax deduction of 20 percent as a sole proprietor or even if you are part of a partnership, own an LLC, or participate in an S corporation.
  • Higher standard deduction: A higher standard deduction may remove the need to itemize personal deductions.
  • Home office deduction: You could be eligible for a home office deduction (this existed before the new tax law went into effect).
  • New equipment write-off: You can potentially deduct a larger amount for new equipment.
  • Business expenses: Hannon writes that these are basically the same with a few new restrictions.
  • Medical expenses: The self-employed can deduct medical expenses, but the percentage allowed has actually gone down for 2018 and will go back up in 2019.
  • Education and training: Work-related education is deductible with some restrictions.
  • Automobile expenses: Mileage driven for business is deductible at a slightly higher per-mile rate in 2018.
  • Retirement savings: If you're 50 or older, and you don't have an employer retirement savings plan, you can put up to $6500 into a traditional IRA.

Hannon wisely recommends scrupulous book-keeping if you are self-employed. Read her informative article here: 
https://www.aarp.org/work/small-business/info-2018/freelancers-new-tax-bill.html


Why the Gig Economy May be a Boomer's Best Bet

OnYourOwnI've written frequently about how age discrimination tends to force Boomers out of their jobs and into early retirement. In March 2018, a rather stunning report by Pro Publica and Mother Jones uncovered alleged massive elimination of older workers at no less a stellar company than IBM. According to the Pro Publica investigation, "ProPublica estimates that in the past five years alone, IBM has eliminated more than 20,000 American employees ages 40 and over, about 60 percent of its estimated total U.S. job cuts during those years. 

"In making these cuts, IBM has flouted or outflanked U.S. laws and regulations intended to protect later-career workers from age discrimination, according to a ProPublica review of internal company documents, legal filings and public records, as well as information provided via interviews and questionnaires filled out by more than 1,000 former IBM employees."

Sadly, this is just one example of widespread actions taken against highly skilled Boomer workers who have decades of experience, want to continue to work, and in many cases, need to continue to work. Once let go, of course, age discrimination continues to plague them, since an unfairly fired Boomer often has great difficulty getting re-hired by another company.

This is one reason the gig economy is flourishing. Self-employment in the U.S., according to the Bureau of Labor Statistics, is highest among people 65 and older (24.1 percent), with second highest among people 55 to 64 years of age (14.7 percent). A forecast by Intuit predicts that 7.6 million Americans will be working in the "on-demand" economy by 2020, which is  more than double the number in 2015. The on-demand economy will continue to see healthy growth in subsequent years, with some 79 percent of workers saying they take on part-time gigs.

Some other facts about the gig economy are impressive enough to open the eyes of Boomers who need to seek non-traditional employment, as reported by The Balance:

  • 70 percent of self-employed workers chose that status of their own free will for either a primary or supplemental source of income (McKinsey Global Institute)
  • Over 50 percent of self-employed workers want to stay that way -- they intend never to return to traditional full-time employment (LinkedIn ProFinder)
  • 20 to 30 percent of workers in the U.S. and Europe are engaged in "some form of independent work" (McKinsey Global Institute)
  • Numerous industries are showing robust growth for self-employed workers, including healthcare, real estate, construction, finance, and software/IT services (LinkedIn).

Bottom line: If you are on the outs with full-time employment, maybe it's time to get into the gig economy.